Trade Restrictions and Tariffs

¶ … International Tariffs

Quintessentially, a tariff is a tax on goods that are transferred overseas. Those goods are either imports or exports; tariffs provide a degree of stabilization for the competition of imports and exports (Helpman and Razin, 1978, p. 1131). Specifically, tariffs apply to merchandise that is imported or exported between different nations, regardless of their location. There are a number of different types of tariffs and variations on this concept as a whole. Tariffs are similar to customs duties, which are the indirect taxes which must be accounted for when goods are traded between countries. These duties can pertain to both imports and exports. Many people use the terms tariff and customs duty interchangeably. Tariffs function as a collection or listing of goods and typically contain the rate of the customs duty. That rate is generally the amount of the tariff, whether it applies to imports or exports.

In many circumstances, tariffs are regarded as barriers to trade because they affect the rate and the amount of goods that are exchanged between countries. However, there are other types of trade barriers existent that do not pertain to tariffs. For instance, it is fairly common for those engaging in international trade to have to apply -- and pay -- for licenses related to importing and exporting various goods. There are also quotas which restrict the quantity of a particular commodity that a country is willing to accept in its countries; occasionally, quotas are applicable to exports as well. Other restrictions pertain to embargos and subsidies. In the instance of the former, merchants must wait for a certain period of time before they are allowed to import or export a particular substance. Subsidies are typically implemented to pay merchants from trading a certain commodity. Although merchants can capitalize on subsidies, they are still barriers to the free exchange of international goods.

One can justify the deployment of trade barriers in a number of different ways. However, the majority of them pertain to a relatively simple principle. Countries want to maintain a favorable balance of trade. Maintaining such a balance frequently requires them to account for the goods that they import and that they export in such a way that they are not entirely dependent on other countries. Also, the more that they are able to maintain a favorable balance of trade the better esteem and worth their countries are in what has been a global economy for some time now. Trade barriers prevent situations in which a country requires too much of a certain product from another country in order to operate or function.